Private insurers have been allowed to offer Medicare Advantage (MA), a competing version of Medicare, since 1985. These insurers receive a fixed amount for each Medicare beneficiary who chooses to enroll with them based on the most current formula. Over the years, MA plans have artfully adapted to each formula change in order to extract maximum profits. Should anyone be surprised? Private insurers entered the Medicare market to make money for their investor owners. It wasn’t very challenging for them. They use two basic (fruity) strategies: cherry-picking and lemon-dropping
Cherry-Picking. All the insurers had to do was offer enrollment to the healthiest seniors using their finely honed skills in marketing, benefit design, and enrollment office locations in combination with others leaving the sicker seniors in traditional Medicare. That bit of cherry-picking cost taxpayers an extra $41 billion. Medicare caught on after 20 years of overpaying and flipped the rules, making it more profitable to care for sicker seniors. Insurers had no problem foiling this attempt, which only made them more profitable. They selectively enrolled beneficiaries with very mild cases of serious conditions who required little to no treatment, earning them enhanced payments without the proportionate increased costs.
Lemon-Dropping. Freedom Health located in Tampa, Florida was caught in the act of defrauding Medicare by an undercover sting operation involving the FBI and an insider wearing a wire. Freedom Health administered Medicare Advantage plans and had been bouncing sales agents for getting costly patients (lemons) off its rolls. It also engaged in the industry standard practice of overstating the number of contracted providers in order to receive more clients. Further service-expansion fraud involved briefly adding doctors to fluff up its networks and then dropping them as soon as they gained the additional membership.
And they weren’t finished yet. There was also money to be gained by risk adjustment fraud; it found ways to seek out the most profitable codes to bill and to assign added codes. Their own internal audits showed that four-fifths of the codes were unjustified, but that didn’t stop the frauds in management. Freedom eventually agreed to pay $31.7 million to the government as the cost of continuing to do business without admitting liability.
The company was subsequently sold to Anthem for more than $1 billion. Unlike Rick Scott, who became governor and then Senator from Florida, who who held the record for stealing the most from Medicare, Bob Patel, CEO of Freedom Health ,did not seek public office. He was who was named Florida Trend’s “Floridian of the Year